Will Fed talk down markets or add helium?

Pfizer Inc., the world’s biggest drug maker, jumped 1.6 percent after reporting third-quarter profit that beat analysts’ estimates. The S&P 500 climbed in 12 of the past 14 sessions through yesterday. The 16-day government shutdown earlier this month took at least $24 billion out of the economy and will spur the Fed to wait until March to taper, a Bloomberg survey showed this month. Retail sales dropped 0.1 percent last month, according to data released today.

Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) is up 3 points to 1762 this morning, on what can be considered the perfect amount of weakness in this morning’s data: not too weak to scare the market, but weak enough to excite the market into thinking the Fed will delay its tapering actions possibly to at least March 2014. With the market at these levels, we do believe it is ripe for a small retracement below 1750, but at the same time we will wait to see just how dovish the Fed will be tomorrow. They could always surprise the market, seeing how much markets have rallied in October, and clarify that they are certain they will taper, and it could even come in December. That would likely serve to take some helium out of the SP500.

Bonds: The DEC13 U.S. 30-year bonds (CBOT:ZBZ13) are down 5 ticks this morning to 135’02. Tomorrow’s meeting is a pivotal meeting for the bond market. We don’t expect any major changes from the Fed’s verbiage. If the Fed does try to talk down the markets because of the rapid October rise we could see both stocks and bonds go down. If the Fed stays the course on its dovish stance and indicates it may taper in the future, but it may also not depending in the conditions, we could see bonds extend their recent rally to at least 136.

Currencies: The DEC13 USD (NYBOT:DXZ13) is up 15 ticks this morning to 79.46. We could see this index continue its slide tomorrow if the Fed indicates it is temporarily holding off on a taper, but at the same time, the Dollar has gone down quite a bit this month and could be ripe for a short term rally. Other major currencies are down today, with the DEC13 Aussie down 84 ticks, the DEC13 Kiwi down 50 ticks, and the DEC13 Pound down 83 ticks. We believe the DEC13 Swiss Franc could take a tumble in the near future from these levels which are currently at 111.60.

Commodities: DEC13 coffee (NYBOT:KCZ13) continues its slide for the 10th day in a row! We wonder when the selling will stop. We believe it currently may be in oversold conditions and would not be surprised to see a base forming soon. DEC13 WTI crude oil (NYMEX:CLZ13) is down $.53 to $98.16, after trying to get above $99 but failing. We would not be surprised to see the recent downtrend in Crude oil continue, and look for the low $90′s ($92) as a first target. DEC13 gold (COMEX:GCZ13) is down $5 to $1,347, awaiting Fedspeak tomorrow.

About the Author

Anthony Lazzara, CEO of Newport Beach, Calif., commodities investment firm Lido Isle Advisors, spent 10 years as a trader and floor broker at the Chicago Board of Trade and Chicago Mercantile Exchange. Anthony has significant experience in the energy, fixed income, and equity futures markets. After being a long-time independent futures trader, Anthony saw a tremendous opportunity to educate investors on how to invest in professional traders. Anthony is now focused on his duty as CEO of Lido Isle Advisors.